Chicken Little' And The Budget

April 07, 1986|The Morning Call

To the Editor:

The editor in his March 31 "Fiscal cowardice in Washington" has fallen prey to "Chicken Little" mentality and compounds it with considerable inexactitude.

While I am completely supportive of responsible fiscal policy in all parts of government, it is becoming obvious that the federal debt crisis is being blown out of proportion and that the call for a constitutional amendment for a balanced budget is a questionable response to uninformed frustration.

The editor incorrectly states that federal government does not meet the basic rule of balance of income and outgo when compared to the private sector and state and local government. This is deceptive analysis because the federal government does not use balance-sheet accounting. What this simply means is that every payment out is regarded as an expense with no provision made for the investment aspect of a transaction and the corresponding creation of an itemized credit account to reflect tabulation and valuation of hard assets to arrive at net worth as do individuals and businesses.

If the total value of federal assets including infrastructure, gold (it's currently on the books for $17 anounce), land, buildings, other hard assets and hardware were tabulated, conservative estimates suggest a near balance of assets and indebtedness. Pretty good for any ongoing organization.

Contrary to what you say, using the government's accounting methods typical individual families fail in balancing budgets if they have a mortgage, car loans, education loans or secured indebtedness. The mere existence of significant debt does not mean insolvency and this is what you seem to suggest is the case for Uncle Sam.

Municipal and state governments more skillfully camouflage their indebtedness for capital expenditures through the creation of hundreds of municipal, county and state authorities which fund the debt and permit payoff just as a consumer does. No matter how perceived, it still is debt. In terms of percentage of income, state and local governments have as much or more debt than the federal government. In fact, Pennsylvania and New York are the nation's leaders in rankings of indebtedness by states. So enough talk about the virtues of this bunch.

Finally, reasonable government indebtedness is far from being the demon so often pictured. Federal debt is also the repository of the savings of a growing economy that citizens and businesses invest in willingly. The government is and has been the most stable outlet for savings, since the private sector is incapable of using all savings in an orderly fashion as can be evidenced by the disruptive nature of inevitable cycles of expansion and recession. A balanced budget amendment would apparently eliminate this important function of government.

Sen. John Heinz should be commended for his recent vote against the balanced budget amendment. Tampering with the Constitution is "heady stuff" and is deserving of better thinking then that set forth in your editorial.